26 U.S.
Code § 662 - Inclusion of amounts in gross income of beneficiaries of estates
and trusts accumulating income or distributing corpus
(a)
Inclusion
Subject to subsection (b), there shall
be included in the gross income of a beneficiary to whom an amount specified in
section 661 (a) is paid, credited, or required to be
distributed (by an estate or trust described in section 661),
the sum of the following amounts:
(1) Amounts required to be distributed
currently
The amount of income for the taxable
year required to be distributed currently to such beneficiary, whether
distributed or not. If the amount of income required to be distributed
currently to all beneficiaries exceeds the distributable net income (computed
without the deduction allowed by section 642
(c), relating to deduction for charitable,
etc., purposes) of the estate or trust, then, in lieu of the amount provided in
the preceding sentence, there shall be included in the gross income of the
beneficiary an amount which bears the same ratio to distributable net income
(as so computed) as the amount of income required to be distributed currently
to such beneficiary bears to the amount required to be distributed currently to
all beneficiaries. For purposes of this section, the phrase “the amount of
income for the taxable year required to be distributed currently” includes any
amount required to be paid out of income or corpus to the extent such amount is
paid out of income for such taxable year.
(2) Other amounts distributed
All other amounts properly paid,
credited, or required to be distributed to such beneficiary for the taxable
year. If the sum of—
(A) the amount of income for the taxable
year required to be distributed currently to all beneficiaries, and
(B) all other amounts properly paid,
credited, or required to be distributed to all beneficiaries
exceeds the distributable net income of
the estate or trust, then, in lieu of the amount provided in the preceding
sentence, there shall be included in the gross income of the beneficiary an
amount which bears the same ratio to distributable net income (reduced by the
amounts specified in (A)) as the other amounts properly paid, credited or
required to be distributed to the beneficiary bear to the other amounts
properly paid, credited, or required to be distributed to all beneficiaries.
(b) Character of amounts
The amounts determined under subsection
(a) shall have the same character in the hands of the beneficiary as in the
hands of the estate or trust. For this purpose, the amounts shall be treated as
consisting of the same proportion of each class of items entering into the
computation of distributable net income as the total of each class bears to the
total distributable net income of the estate or trust unless the terms of the
governing instrument specifically allocate different classes of income to
different beneficiaries. In the application of the preceding sentence, the
items of deduction entering into the computation of distributable net income
(including the deduction allowed under section 642
(c)) shall be allocated among the items of
distributable net income in accordance with regulations prescribed by the
Secretary. In the application of this subsection to the amount determined under
paragraph (1) of subsection (a), distributable net income shall be computed
without regard to any portion of the deduction under section 642
(c) which is not attributable to income of the
taxable year.
(c) Different taxable years
If the taxable year of a beneficiary is
different from that of the estate or trust, the amount to be included in the
gross income of the beneficiary shall be based on the distributable net income
of the estate or trust and the amounts properly paid, credited, or required to
be distributed to the beneficiary during any taxable year or years of the
estate or trust ending within or with his taxable year.
